How to Buy Your First Rental Property in 9 Simple Steps

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Are you thinking about buying an investment property to rent out and start generating some passive income? You’ve come to the right place. In this guide, I will share with you how to buy your first rental property. I’ll cover everything you need to know and each action you need to take, step-by-step.

I am SO excited to share this guide with you because I have recently gone through this process myself. Three months ago, I knew nothing about investing in rental property. But after reading countless books, blog posts, and hours of listening to podcasts, I am now under contract on my first rental property. 

While I could have waited to write this guide until I have some more properties under my belt, I felt there would never be a more appropriate time than now to share with you how to invest in rental property as a beginner. The steps I am going to share with you are the exact steps that I have taken to kick off my rental property investing career. 

This guide will be long but think of it as your step-by-step bible to investing in your first rental property. You’ll learn everything you need to know. I can assure you these steps will work – they have worked for me. 

So, stick with me, and let’s get started!

How to Buy Your First Rental Property Pinterest Pin

Why Buy Rental Property?

Before I show you the steps I used to buy my first rental property, I want to share with you why I am investing in rental property and some things to think about before deciding to purchase rental property yourself.

For me, I decided to invest in real estate as a means to diversify my income. 

At the start of the Coronavirus pandemic, I had what some would call an existential crisis. I quickly realized that my entire financial well-being was reliant on a salary from my employer. While I have a job in which I feel reasonably secure, I decided I needed a way to diversify my income.

So, I set out on the path to investing in real estate. While there are a lot of different types of real estate investing, I decided that investing in rental properties would be the best for me based on my financial goals

Personally, my financial goal is to build as much passive income as possible. And when I say passive, I mean a couple of hours per month max. I view time as a valuable asset, and I realized that investing in rental property would be reasonably hands-off long-term.

That is my why. Consistent cash flow. Financial independence. That’s why I chose rental property investing.

You, too, need a why.

Cash Flow

Real estate investing is a get rich slow game. If that doesn’t align with your financial goals, I suggest you look elsewhere. Despite what all the supposed gurus will tell you, investing in real estate is a long game. So, if you don’t have a why, it will be challenging to keep pressing forward. 

Why Invest in Rental Properties

Next, I want to explain why I found investing in rental properties to be so attractive. Here are some of the reasons:

1. Rental Cash Flow

When choosing to invest in real estate, you could go down a lot of different paths. You could flip properties. You could wholesale them. And much more. 

But, many of these types of real estate require continuous work. If you do not work, you do not make money.

That’s what I love about rental property. Yes, it will require some work. But in general, you should be able to collect a rent check every month without a significant time investment.

Every month, when you receive your rent check, you’ll (hopefully) have cash flow left over after all expenses are covered. 

Rental cash flow is wealth builder #1. 

2. Mortgage Paydown

One expense you’ll face in rental property investing is the mortgage payment. But mortgages are a positive type of cost. Here’s why. When you receive your rent check, you’ll pay your mortgage. And, some of that mortgage payment will pay down the loan. In other words, you’re building equity (ownership interest) in the property. 

So, each month, a tenant is paying part of your mortgage. Your equity in the house will increase every month, all with little to no effort from you.

Mortgage paydown is wealth builder #2.

3. Depreciation

When most people think of depreciation, they think of the value of their car, decreasing the longer they hold it.

However, there’s a different kind of depreciation when it comes to rental property investing—a good sort of depreciation.

The IRS allows property owners to claim depreciation expense, effectively reducing their taxable income.

What does this mean for you? It means you’re going to earn a significant chunk of your rental income tax-free.

Now, of course, there is no such thing as a free lunch. So, if you sell the property, you’ll owe the IRS some taxes (a concept called depreciation recapture). However, there are some ways to avoid some taxes when selling the property using a concept called a 1031 exchange.

1031 exchanges are WAY beyond the scope of this post. However, the important thing to know is that the income you earn from your property will be taxed at a reduced effective rate. 

Additionally, if you’re buying rental property, you can deduct quite a few expenses on your tax return.

Rental property investments face very advantageous tax treatments relative to many other forms of income.

Said another way, you can work your tail off at your regular job and work for free four months a year (the months of income the government is receiving by way of taxes), or you can leverage investments that give you tax benefits. I vote for the latter. 

Tax benefits are wealth builder #3. 

Rental Property Depreciation

4. Appreciation

Property doesn’t always go up in value (many folks learned that the hard way in 2009). However, historically, real estate tends to increase in value at approximately the rate of inflation.

What does this mean for you? It means that buying property is an inflation hedge. If the economy experiences inflation, chances are, the value of your house will increase, too.

And if the value of the house increases by more than the rate of inflation, well, then that’s just gravy.

Appreciation in the house – a house you own that someone else is paying for – is an important element of rental property investing.

Appreciation is wealth builder #4.

5. Limited Downside Relative to Other Investments

Now, this next reason isn’t necessarily a direct wealth-builder, but it is an important consideration.

When you purchase a stock, your downside is unlimited. You could lose 100%. Your upside is unlimited, too, but there’s also more risk.

That’s where I view real estate differently. Can property values go down? Absolutely. Can property values go down by 100%? Pretty unlikely.

So, while you can lose money in real estate, you own an asset that has a floor on its value. And, despite this floor, it is still possible to earn substantial returns.

In other words, potential upside with limited downside.

There are very few investments with this type of profile, so it’s worth considering.

6. OPM

As someone that works in financial services, I am the first to admit that I love the concept of using leverage to acquire assets. You can buy real estate assets using other people’s money (OPM).

When buying a rental property, it is not uncommon to borrow 75-80% of the value of the house. In other words, you get a cash-flowing asset that builds wealth through rental income, mortgage paydown, appreciation, and tax advantages, all while paying for just 20% of the property yourself.

Of course, there are limits to using leverage. But, buying assets with other people’s money is wildly powerful, and it makes real estate an extremely attractive asset class in which to consider investing.

Other People's Money

Are You Ready to Buy Rental Property?

By now, I am willing to bet you’re getting more excited by the minute about investing in rental property. 

But, there’s one more thing we need to cover before we dive into the steps you need to take to buy your first rental property. Are you are ready to take on the process?

The number one thing you need to do before buying your first rental property? Get your own financial house in order. That means:

While I can’t tell you everything you need to do to get your finances in order in just a few words, you probably have a pretty good idea of whether you can afford rental property or not. 

Buying an Investment Property Before Your First Home

One question that comes up commonly is whether it makes sense to buy an investment property before your first home.

In my view, having bought your own home is by no means a pre-requisite to purchasing a rental property.

As explained in the venerable book, Rich Dad Poor Dad, your primary residence is a liability, while a rental property is an asset. In other words, your primary home takes money out of your pocket while an investment property puts cash into your pocket.

That’s why, if you’ve saved up some money, you’re better off buying an investment property before your first home.

The biggest downside to consider, however, is that you won’t have the experience of purchasing and owning a home for yourself. 

Experience can be an asset, both in understanding how home buying works and what it takes to maintain a property. However, there’s no time like the present to learn, and rental property investing will teach you more about real estate than owning your primary home ever could.

So, don’t be afraid. Dive in!

buying rental property

What Type of Investor Do You Want to Be?

Before you jump into buying your first property, you’ll also want to think about what type of investor you want to be. Do you want calls from tenants at 2 A.M. if it means saving a few bucks, or would you rather save headaches and put your investments on autopilot?

Either approach is acceptable, but it’s essential to know how much time you have to devote to rental property investing, what your strengths are, and where you think it would make sense to seek help.

The answer is different for everyone, but as I go through this guide, make sure to give this some thought.

You may also want to consider your willingness to deal with problems as they arise. Tenants will be late on payments. You may eventually have to evict someone. You will have unplanned maintenance. These sorts of events are all part of the process. But, if you follow the steps in this guide, you’ll have a game plan to handle these situations. But make sure you’re mentally prepared to handle them when they come up!

If you don’t want to deal with these sorts of issues, it’s okay to decide that buying a rental property isn’t right for you. There are all sorts of ways to invest in real estate without buying rental property. I also invest in real estate passively through a platform called Fundrise. You can learn more about that service by reading my full review.

Fundrise

Fundrise is my favorite tool for getting started with real estate investing. It allows you to invest in a diversified portfolio of commercial real estate at low costs and with a great deal of transparency. Check out my full review to see if this tool is right for you!

If you’ve made it this far, however, you’ve probably got your mind made up on wanting to learn how to buy your first rental property. So, let’s get into the nitty-gritty and the nine steps you need to know to buy your first rental property. 

1. Build Your Down Payment

The very first thing you’ll want to do to invest in rental property is save for the down payment. 

Saving for a rental property down payment isn’t much different than saving for a down payment on a house you plan to purchase for yourself. The difference is, however, don’t expect to use some fancy loan program with very little money down. At a minimum, you should bank on putting 20% down + closing costs (3-5% of the purchase price).

In addition to saving for the down payment, it is crucial when buying a rental property to have cash reserves saved up for any unexpected expenses. I would recommend that you save 6-months of rental property expenses. I’ll cover how to calculate your monthly expenses shortly, but for now, just keep this concept in mind.

To speed your process of saving for the down payment, here are some ideas to get you going:

Down Payment on a House

How Much Money Do You Need to Purchase a Rental Property?

Now, you’re probably thinking, okay, I need 20%, but 20% of what? Great question! Now, if you live on the coasts, you may be thinking that it will take a small fortune to buy a rental property.

However, I am here to tell you, that is not the case. Why? Because I am going to urge you to consider investing somewhere the numbers make sense, not necessarily somewhere that is near to you.

And I’ll be sharing with you exactly how to do that by building out your team.

While I could tell you the answer to how much money you need to purchase a rental property is, “it depends,” I am not going to do that.

No, instead, I am going to say that there are $100,000 properties all over the country that could make great rentals. So, if you need 20% down + closing costs, I am going to encourage you to save $25,000 to buy your first rental property. 

There are, however, some creative ways you can acquire your first property without having this down payment saved up. The Book on Investing in Real Estate with No (and Low) Money Down is fabulous. This book isn’t some fluff piece written by a self-proclaimed guru. These are strategies that work, and I am currently exploring some of these ideas to accelerate the path to my next deal. However, just remember, the more money you put into a deal, the less risky it becomes.

How Much Should You Spend on Your First Rental Property?

You may also be wondering how much to spend on your first rental property. Again, this is going to vary by market and your risk tolerance.

However, for most folks, I am going to suggest aiming for a property in the $100,000 range to get started.

A $100,000 house is sizeable enough that you’ll have “skin in the game” and stay focused but also an amount of money that allows you to make mistakes and learn from them without ruining you financially. Making investment mistakes is part of the process and should be anticipated.

While you’re working on saving your down payment, you’ll want to start learning so that once you have the money ready, you have the knowledge to get started right away. 

2. Get Educated

There is a TON you need to know to buy your first rental property. No matter how much I share with you, it will never do justice to the amount of educational firepower you should have in your arsenal before you buy your first rental property.

So, while you’re saving money towards your down payment, I want you to start getting educated on real estate.

The #1 way that I learned how to buy my first rental property was through reading. Below are three books you have to read before you buy a rental property. Non-optional. Non-negotiable. You must read these books if you want to be successful. If you’re going to skip over this part, you will not be successful, and real estate probably isn’t right for you. 

No. 1: Rich Dad Poor Dad

I am the first to admit that Rich Dad Poor Dad will tell you nothing of the mechanics of investing in real estate. But it will teach you the most important lessons you’ll ever learn in real estate. And that’s why I am putting it on the must-read list before you buy your first property.

Rich Dad Poor Dad

No. 2: The Book on Rental Property Investing

This book is your first action step. It is an intro from A to Z of how to buy your first rental property. The author knows real estate inside and out, and all of the action steps are super easy to understand and implement.

The Book on Rental Property Investing

No. 3: Long-Distance Real Estate Investing

If you just read the title of this book, you’d think it is only applicable if you plan to buy a property somewhere other than where you live. And while I think that’s an option worth considering, this book is a must-read even if you’re planning on investing in your own backyard. The reason is that this book goes a step further than The Book on Rental Property Investing and gives you hyper-detailed tactics for setting up your team, rehabbing properties, and more. 

Long-Distance Real Estate Investing

While I genuinely believe you cannot go down this road without reading the above books, I would also encourage you to pursue other approaches to learn even more.

For example, I LOVE the BiggerPockets Podcast, as it is countless hours of people talking about doing deals. Learning through osmosis is hugely beneficial, so it’s worth checking out podcasts such as this one.

Another tremendous resource is the BiggerPockets website. BiggerPockets is the number one destination for real estate investors on the internet. They have great tools, resources, and more, including a forum with thousands of other investors looking to help answer your real estate investing questions.

Finally, as you work on educating yourself, make sure you avoid snake oil salespeople. Unfortunately, this industry is full of them. Anyone who tells you making money in real estate is fast or easy is lying to you, so let the buyer beware.

The above resources are some of the best I’ve found for beginner real estate investors, and that’s why I think you should start there. But if you’re looking for more books, here are some of the Best Real Estate Investing Books.

3. Select a Market

Once you’ve started getting educated on how to buy your first rental property, the next thing you’ll be wondering is what is the best place to buy a rental property.

The bad news is:  it depends. The good news, however, is that there are markets all over the country that are just waiting for investors to swoop in and buy rental property.

While there is no one “best market,” here is what I can tell you. Typically, the coasts tend to have high property prices relative to rental prices. The Midwest, by comparison, has far more homes for sale that are inexpensive relative to rents. 

This ratio is what we call the rent-to-price ratio. As an example, if the average home in a market rents for $1,000 per month while the average home price is $100,000, that’s good. If on the coasts, however, the average rent is $2,000 per month and the average home price is $400,000, that’s not so good. 

The rent-to-price ratio is just one metric to consider. 

As you’ll note, you’ll also get more for your proverbial buck in the Midwest. Homes cost less, and that means the cost of entry is significantly lower.

As I mentioned above, I would encourage you to consider investing in a market other than the one located nearest you if it makes sense.

Overhead view of Houses

While there are countless factors to consider in choosing a market (and not enough time to cover all of them here), here are a few factors to consider in addition to those mentioned above:

Population Growth

If people are migrating to a market, that’s good. That means home prices are likely to rise over the long run. If people are leaving a market, that’s bad, and it means you will likely not see much appreciation (if any).

Job Growth & Diversity of Employment

You’re looking for stability from your rental property purchase, and that means your tenants need to find stable, good-paying jobs.

Look for a city that is bringing in jobs and has a diverse employment base. For example, if a city’s only industry is tech, that could be cause for concern. But if a city has a big insurance headquarters, an Amazon warehouse, and a big bank, that’s good! 

Percentage of Renters

Next, you may want to consider how many people rent in the market you’re considering. If only 5% of people rent in your market, that means it’ll be hard to find a tenant. If 60% of people rent in your area, they may be inclined to jump to another rental as soon as you propose a rent increase. 

Rent-to-Income Ratio

Finally, consider rents relative to incomes. What you’re looking for here is a typical rent-to-income, meaning that roughly 1/3 of people’s income goes towards housing. Higher or lower numbers can be cause for concern. 

4. Get Super Clear on Your Investing Criteria

Once you’ve chosen your desired market, it’s time to get super clear on your investment criteria.

Duplex

The reason I propose this as your next step is that when you start calling prospective team members, you need to know more than just “I want to buy a rental property.” If you say that, they will not return your phone calls. And I’m not kidding.

No, instead you want to get specific on things like:

  • Property Type
    • Single-family, duplex (two-unit), triplex (three-unit), fourplex (four-unit), etc.
  • Neighborhood classification
    • A class neighborhood (good schools, low crime, white picket fences, green grass), B neighborhood (decent schools, relatively lower crime, modest homes), or C neighborhoods (blue-collar, weaker schools, lower prices, higher crime)
    • Stay away from D neighborhoods. No matter how good the numbers look, it’s not worth it
    • Notably, better neighborhoods = lower returns
  • Desired Home Price Range
  • Management Philosophy
    • Will you manage the property yourself, or will you hire a property manager?
  • Property Condition
    • Are you willing to fix up a property, or do you want it to be rent-ready?
  • Desired Returns

As an example, when I started to search for my first rental property, my investing criteria sounded something like the below:

“I am interested in single-family or small multi-family rental property in a B-neighborhood for $150,000 or less. The properties I am looking for are rent-ready, and I plan to hire a property manager. I would like to earn an 8% cash-on-cash return.” More on cash-on-cash returns in a minute.

Once you set these criteria, it can help you find properties. Your goal is to eliminate any properties that do not meet your investing criteria as quickly as possible. Of course, it’s okay to change your investment criteria as you learn more (I certainly did), but this will give you a guide to start your search. 

5. Build Your Team

Next, it’s time to start taking some serious action! It’s time to build your team!

Your team will help you find properties, finance them, and manage them. Let’s talk about each team member you’ll need. 

Real Estate Agent

The number one team member you’ll need is a real estate agent. And no, not just any real estate agent. I want you to find a real estate agent that is an investor themselves or regularly works with investors.

Why? An agent that is an investor themselves or works with investors will understand your specific needs. You are not looking for your dream home. You’re looking to make money.

A real estate agent that knows how to invest can help you identify properties that might meet your return criteria. They also won’t waste your time on properties that don’t meet your investment goals, and they can help you identify critical issues related to rental property.

The best place to look for a realtor is on the BiggerPockets forums.

Meeting Real Estate Agent

Lender

The next team member you’ll need is your lender. Without the lender, chances are you won’t be able to afford the property. The lender will front you most of the money you need to do the deal.

The best way to find a lender is to ask your realtor, other investors you know, or on a forum like BiggerPockets. 

Loan terms can vary dramatically, so it’s worth shopping around a few banks.

You may be wondering, what is the best way to finance a rental property? 

If you read internet forums, you’ll find people suggest a conventional 30-year fixed-rate mortgage. This type of mortgage is structured very similarly to that of your primary residence. Is this the best kind of financing available? Absolutely. 

Unfortunately, I am also going to tell you that you should not use a 30-year fixed-rate mortgage to buy your first rental property.

Why? Because 99.99% of the time, you cannot purchase a property inside of a limited liability company (LLC) using a conventional mortgage. I will explain why that’s important in a minute.

While there are lots of financing options available, the one that I use is a commercial loan (or sometimes referred to as a portfolio loan). In a nutshell, this is a commercial mortgage that typically has a shorter amortization period and often has some type of balloon payment. 

There’s a lot of nuance to loan options, but the important thing to remember is that a commercial loan allows you to buy a property inside of an LLC and limit your legal liability.

Rental Property Portfolio

Property Manager

Next, unless you plan to manage the properties yourself, you’ll want to find yourself a good property manager.

A property manager will deal with placing tenants, collecting rent, maintenance calls, and much, much more.

Unless you want the 2 A.M. calls that a pipe is leaking, hire a property manager. The idea is to create a passive income stream, not another project. 

Insurance Company

You’ll also want to find an insurance company to cover the structure of the house as well as potential liability. 

While you have lots of choices, the easiest thing to do is just call your existing insurance company that insures your own home – chances are they can insure your first rental property too. 

Network

Finally, while the above people are the key members of your team, there’s one key element missing – building your network!

People in your real estate network can help you find deals, understand the numbers, and share their own experiences with you so that your experience is smoother.

There are lots of ways to network. For me, I joined a Facebook group of investors in my market, was introduced by people on my team to others (such as wholesalers), and I am considering getting involved in the local Real Estate Investors Association.

All of the team members above play a critical role in your success.

Once you’ve got your team, you’re almost ready to start finding and evaluating deals—just one more step before we get to that. 

Networking

6. Set Up the Right Legal Entities

Yes, before you start looking for deals, we need to talk about liability. 

While it is possible to buy a rental property in your personal name, I do not recommend it. The problem is, you’ll expose yourself to unlimited liability. And no. Homeowner’s insurance will not fully protect you from potential liability. 

Instead, I would urge you to talk to a qualified attorney who is familiar with structuring legal entities for real estate investors. Legal structuring is about minimizing your risk, so I would urge you to steer clear of the “LegalZoom” approach – this is not the place to cut corners. 

For many investors, a limited liability company is the right choice, but you’ll want to seek advice from a professional.

As I mentioned above, buying the property in a corporate entity may mean that you can’t achieve financing that is quite as favorable as if you purchased the property in your name, but that’s a small price to pay for protecting yourself.

Finally, I would urge you to exercise caution. There are also a lot of slimy lawyers floating around the real estate community that recommend strategies that push the boundaries of the law. Choose your attorney wisely. 

7. Learn How to Model Deals

If you’ve stuck with me thus far, it’s time to get to the real fun. It’s time to learn how to determine whether a rental property is good or bad!

In your quest to learn how to evaluate rental property investments, undoubtedly, you’ll stumble across many rules of thumb like the 1% rule, the 2% rule, and the 50% rule that aim to help you buy suitable investments. Here’s a quick overview:

What is the 1% Rule?

This rule states that a property will rent for 1% of the purchase price per month (e.g., $1,000 per month in rent on a $100,000 property).

What is the 2% Rule?

The property will rent for 2% of the purchase price per month (e.g., $2,000 per month in rent on a $100,000 property).

What is the 50% Rule?

This rule states that you should assume 50% of the gross rent will go towards property expenses before the mortgage payment. So, if your rent is $1,000 per month, assume that you’ll have $500 of cash flow before the mortgage payment. 

While these rules of thumb are worthy of your consideration, they cannot tell you which properties will work in your market. 

No two deals are the same. That’s why you need to understand the income and expenses of the particular deal you are evaluating and run the detailed numbers yourself.

Rental Property Analysis

Estimating Rental Property Income & Expenses

First, when evaluating a property, you’ll want to estimate rent. While there are some quick sources to check for rental rates (Facebook Marketplace, Zillow, BiggerPockets, etc.), the best resource is your property manager. They know the local market and can give you laser-accurate rent estimates. 

Next, you’ll want to make sure you consider the following expenses:

  • Property Taxes
    • Look out for differences that may apply to investors vs. homes which are owner-occupied. Your local assessor’s website is the best resource to find this information.
  • Mortgage Payment
    • Talk to your lender to get some indicative terms before you start looking for deals so that you know what to expect. 
  • Vacancy
    • Vacancy is the percentage of the time you expect your property to sit empty.
    • While vacancy varies by market, I use 8% of gross rent in my market.
  • Property Management
    • Consider both monthly management fees as well as marketing fees for placing a new tenant and lease renewals.
  • Insurance
  • Repairs & Maintenance
    • While there no hard and fast rule for how much you should budget for repairs and maintenance, you’ll see many investors use 5% of gross rent. I tend to use this number or something a bit higher if I am renting in a rougher area.
  • Capital Expenditures
    • You’ll also want to budget monthly for significant expenses like roofs, furnaces, etc. There is no hard and fast rule, but here’s a BiggerPockets post, which offers one approach to looking at capital expenditures. 
  • Utilities
    • Typically, utility costs are only applicable to a multi-family home where water or electricity isn’t metered and paid separately by the tenants. 
    • If you own a multi-family home, you may also want to consider if you’ll need to budget for lawn care or snow removal.
  • Administrative Costs
    • Annual tax & accounting costs
    • Business filing fees
    • Etc.

Rental Property Calculator

Once you’ve got all these costs figured out, you’ll want to find a rental property calculator to run the numbers.

While there are countless calculators on the internet, I have found none of them are robust enough for my finance brain to find comfort. That’s why I have developed my own Excel rental property calculation spreadsheet, and I want to share it with you for FREE! Sign up below to receive my rental property calculator, so you’re ready to start evaluating deals for yourself.

While the above sounds like a lot of numbers to consider, over time, you’ll find that you can evaluate prospective deals in five minutes or less.

When you start considering the returns of the properties, there are lots of metrics to consider. 

The one you’ll see most investors focus on is the cash-on-cash return. 

What is cash-on-cash return? Cash-on-cash return is just the annual net income of the property divided by your initial cash investment. 

Let’s say you invest $25,000 in a property (down payment + closing costs), and in your first year your total net income is $2,500 (after all expenses). This means your cash-on-cash return is 10% ($2,500 / $25,000). 

Cash-on-cash return is a great place to start, but if you want to learn more about measures of return, check out the book What Every Investor Needs to Know About Cash Flow…and 36 Other Key Financial Measures.

8. Start Looking for Deals!

Once you’ve got a handle on the numbers, it’s time to start looking for deals. Here are a few tips for getting started:

  • Get a pre-approval for your loan – it will help your offers stand out.
  • Set up a strategy with your realtor to find properties and use your property manager to evaluate rental rates on any properties you find.
    • Get creative and look for both on-market and off-market deals to increase your opportunity set.
  • Make offers! When you find the numbers work, start making offers, and stick to your guns! You can’t buy a property where the numbers don’t make sense to you!
    • Are you looking for tips on getting your offer accepted? Check out this excellent BiggerPockets post with some ideas!

The groundwork you’ve laid in the first seven steps will make looking for deals much, much more manageable. If your realtor is actively looking for deals, and you know how to run the numbers, the mechanics of finding and evaluating deals are straightforward. 

While this is the most fun part of learning how to buy your first rental property, it can also be the most frustrating. 

For every 100 properties you find, you might make offers on 10, and have one offer accepted. Looking at a lot of deals is the key to success. And while you look for deals, you’ll get better at evaluating properties along the way.

Stay patient, evaluate lots of deals (at least one per day), make lots of offers, and plan to win some deals! 

9. Go Under Contract and Close the Deal!

Exchanging Money for House

Once you’ve found a deal that makes sense, it’s time to go under contract and close the deal!

You’ll need to have a home inspection, order an appraisal, work with your lender to arrange the loan, and more.

However, at this stage, the process is a lot like buying any other house. If you’ve never done that before, check out this post on How to Buy a House

Once you work through the process, you’ll close the deal. After that, your property manager will guide you through placing a tenant, and that’s it! You’ve done it! You’ve just learned how to buy your first rental property!

How to Buy Your First Rental Property:  A Summary

At this point, we’re rapidly approaching 6,000 words explaining how to buy your first rental property. That should tell you two things:

1) I am fired up to talk about real estate investing. I hope you’ll find it as exciting as I do.

2) While this post is long, I’ve barely scratched the surface, and that means there is a TON to learn. Again, start reading books (like Rich Dad Poor Dad, The Book on Rental Property Investing, and Long-Distance Real Estate Investing), listen to podcasts, and talk to other investors!

Pretty soon, you’ll find investing in rental properties to be a breeze!

To quickly recap, here are the nine key steps to buying your first rental property:

  1. Build Your Down Payment
  2. Get Educated
  3. Select a Market
  4. Get Super Clear on Your Investing Criteria
  5. Build Your Team
  6. Set Up the Right Legal Entities
  7. Learn How to Model Deals
  8. Start Looking for Deals
  9. Go Under Contract and Close the Deal

There is only one thing left to do. It’s time for you to take action. Massive action will lead to tremendous results. So, what are you waiting for? Get started today!

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